The Chargé in Great Britain ( Sterling ) to the Secretary of State

No. 918

Sir: Referring to the Embassy’s telegram No. 372 dated December 4, 11 a.m., 1925,97 in which the Ambassador gave the substance of his interview with Sir Austen Chamberlain concerning restrictions in the export of crude rubber and other raw materials, and when the Ambassador left with him a memorandum on the position of the United States Government,98 I have the honor to enclose a copy, in triplicate, of a note just received from the Foreign Office dated April 6, 1926, in reply to the memorandum.

I have [etc.]

F. A. Sterling

The British Secretary of State for Foreign Affairs ( Chamberlain ) to the American Charge ( Sterling )

No. A 1353/10/45

Sir: I have the honour to inform you that the proposals contained in the aide-mémoire which the Honourable Alanson B. Houghton was [Page 359] so good as to leave with me during our conversation on December 3rd have received from His Majesty’s Government the closest consideration.

I am not altogether clear whether the joint arrangement which the United States Government have in view would aim at the suppression of all action, even of a purely private character, for enhancing prices, or be limited to an agreement on the part of governments to avoid action calculated to foster and encourage price fixing. If it is the former, I may say that however desirable it may be that commodities should be obtainable at no more than “competitive” prices, it is clear that neither His Majesty’s Government nor the United States Government are in a position to bring about this state of affairs and that accordingly British consumers must be prepared on occasion to pay more than the competitive prices for essential commodities. Thus His Majesty’s Government cannot unconditionally accept the principle that no more than competitive prices should be obtained for such commodities as this country and her colonies are able to supply in payment for the commodities which they consume.
As I understand it, however, it is an agreement of the second character that the United States Government have in view. On this proposal I beg leave to state that His Majesty’s Government fully appreciate the importance of reducing as far as is possible the impediments of all sorts placed by Governments in the way of international trade under present conditions. His Excellency’s aide-mémoire refers only to restrictions of production and exportation but looking at the general question in the widest aspect it is evident that difficulties placed in the way of import all the world over are a prominent feature of the problem to which the United States Government have called attention. His Majesty’s Government would be glad to see any alleviation of these difficulties and would accordingly welcome any understanding with the United States Government which might conduce to that end.
If I say that in the opinion of His Majesty’s Government, it is necessary to regard the question of high customs tariffs as an integral part of the general problem, the examination of which is suggested in the aide-mémoire, it is because this problem raises wide economical questions and cannot be regarded from only one angle but must be studied in the light of all contributory phenomena. High customs tariffs are one of the most important of these phenomena tending, as His Majesty’s Government are convinced, to afford perhaps the most powerful support given by governments to price fixing combinations.
Ready as they are to study this problem with the United States Government, His Majesty’s Government nevertheless feel bound to point out that restrictions and charges, whether on the importation [Page 360] or exportation of goods, are now so world-wide and embrace such diversity of ends that any set of general propositions relating to them must almost necessarily be limited by such numerous exceptions that the general propositions themselves may become of somewhat doubtful value. In the case of export charges and restrictions, as in the case of import charges and restrictions, it is probably impossible to lay down rules which hold without exception. The observance of the same principles cannot be expected from a country whose revenue must, for a variety of reasons, depend upon charges on exports, and from a country which does not find it necessary or expedient to derive any of its revenue in this way. Nor again is it easy to define what the world’s policy should be, having regard to the different natures of the articles of export to which the policy would relate. To take the specific case out of which the American representation on this matter has arisen, the rubber crop differs from other crops in a number of important respects which have a bearing on what the Government should or should not do in connection with it. It is not an annual crop, like wheat or cotton, the area of supply of which can be rapidly increased so that a reduction in any one year which has proved to be excessive can be corrected in time for the next season. Enterprise in rubber planting has to look many years ahead and consequently it follows that the planter’s losses or absence of profit over a long period may result in a serious world shortage of rubber some years later which no action taken when the shortage is felt can correct. Consequently, there is an obligation upon responsible authorities in the case of rubber supplies which is absent, or at any rate present in a smaller degree, in the case of annual crops. Indeed, the need for the adoption of some conservation policy some time ago is already demonstrated by the high price of rubber, in view of which it will be generally agreed that any neglect on the part of the responsible authorities involving the abandonment of plantations and the cessation of planting would have been seriously detrimental to world interests.
It is, of course, impossible to argue that the present high price of rubber is attributable solely or even mainly to the operation of the rubber restriction scheme. It is due to the great expansion in the world’s demand for and use of rubber and the insufficiency of present supplies to meet that demand adequately. That this is the root cause of the present position needs no demonstration, particularly in view of the fact that only about one half of the world’s supply now comes from the restricted areas, and that the export from the restricted areas is to-day very little, if at all, less than it was before the restriction scheme came into operation. This special operation has been referred to not merely because the present proposal of the United [Page 361] States Government arises out of it but also because it serves as an admirable illustration of the difficulty of generalising on the question of what should and should not be done in the matter of export restrictions and charges.
Leaving, however, this particular question on one side, His Majesty’s Government desire to state that, whilst they cannot overlook the great difficulties of arriving at any tenable propositions respecting the legitimacy of particular Government policies in regard either to import or export restrictions, they recognise fully that nothing but good can result from an interchange of ideas about the problem raised by the United States, not merely in the more limited form, but also in its wider aspects as indicated above.
In this connection they desire to remind the United States Government that a preliminary conference, at which it appears possible that United States citizens may assist, will shortly be held under the auspices of the League of Nations for the study of international economic problems. As you are no doubt aware, this meeting is to take the form of a preliminary conference of unofficial experts from the various nations, and is intended, under the guidance of the Council of the League in committee, to prepare the ground for an international economic conference. It appears not unlikely that the subject of price-fixing agreements in international trade may figure amongst those to be considered at this conference, which in any case can hardly fail to discuss some of the larger questions referred to in this communication and in the aide-mémoire.
I should add that His Majesty’s Government for their part consider that the subsequent plenary conference should be one of business and other interests, and that Governments should not be directly represented or in any way bound by the recommendations which, it may make.
Reference is made in the second paragraph of the memorandum to the financing of price-fixing. I beg leave to inform you that, as regards the financing of commodities, His Majesty’s Government have never undertaken any responsibility whatsoever (apart from war emergency measures). They are not in a position to exercise any influence over the action of international combinations by private traders and in particular they are not in a position to discourage the issuer of loans by or on behalf of such combinations, since no control direct or indirect is exercised by His Majesty’s Government over the issue of loans in the London market and it is the settled policy of His Majesty’s Government not to intervene between would-be borrowers and potential lenders.

I have [etc.]

(For the Secretary of State)
Robert Vansittart
  1. Ibid., p. 265.
  2. Not printed; see telegram No. 352, Dec. 1, 1925, 3 p.m., to the Ambassador in Great Britain, ibid., p. 264.